PIMCO Short-Duration ETF Tapped as Money-Fund Substitute

July 8th at 12:02pm by John Spence

PIMCO Enhanced Short Maturity (NYSEArca: MINT) was one of the best-selling ETFs in June as more investors are using short-duration ETFs in place of money market funds, which are facing reform measures.

MINT gathered net inflows of more than $700 million last month, according to IndexUniverse data.

“Near-zero yields on money-market funds have led some investors to stash their cash in ultrashort-term bond funds that take a tad more interest-rate risk. Lately, these funds are also attracting people who have become more fearful of rising interest rates, which depress the prices of longer-term bonds,” reports Murray Coleman for Dow Jones Newswires.

He notes MINT is the most popular ultrashort ETF. As of July 5, the fund held $3.8 billion of assets and paid an estimated yield to maturity of 0.98%, according to bond giant PIMCO. Most money market funds are yielding essentially zero due to the Federal Reserve’s low-rate policies. [Ultra-Short-Duration Bond ETFs as a Cash Alternative]

“We like to use MINT as a complement to money-market funds for people who might need cash-like liquidity in the next six months to two years,” says Peter Speros, an adviser at Sullivan, Bruyette, Speros & Blayney, in the Dow Jones report.

Unlike money market mutual funds, the share price of MINT can fluctuate. However, last month the SEC announced a proposal that would require institutional money market funds to move to a floating net asset value. [Short-Duration Bond ETFs in Spotlight on SEC Money Fund Proposal]

In PIMCO’s ETF business, MINT helped offset outflows from PIMCO Total Return ETF (NYSEArca: BOND), which is managed by Bill Gross, in June. BOND saw outflows of more than $500 million last month. Meanwhile, PIMCO Total Return Fund experienced redemptions of nearly $10 billion, Bloomberg reports. BOND is the ETF version of PIMCO Total Return Fund.

PIMCO Enhanced Short Maturity

The opinions and forecasts expressed herein are solely those of John Spence, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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